When Down Is Up

If this were any other time, home entertainment executives would be weeping in their apple martinis. First-quarter DVD sales were down nearly 8% from the previous year's first quarter, and the latest statistics from The DVD Release Report show that DVD unit shipments for the first four months of 2007 are off a staggering 14.7% from the same period last year.

Was it really just a year and a half ago, when DVD sales finished the year flat, that everyone was crying that the sky is falling?

The difference is that this time there's a light on the horizon — a big, fat, shining light so bright virtually everyone's expecting a veritable bonanza once the fourth quarter rolls around.

Just look at the box office, and there's the first reason home entertainment executives are all smiles these days: a trilogy of three-quels with opening-weekend tallies of well more than $100 million, each of them most likely arriving on DVD in the weeks before Christmas. And it's not even summer yet, with more theatrical blockbusters — and fourth-quarter DVD releases — to come.

Next, take a trip to the friendly neighborhood Wal-Mart or Target. See any videocassettes? I didn't think so. Those clunky VHS cassettes have been a drag on consumer spending almost from the day DVD debuted. Now, with apologies to Richard Nixon, we don't have VHS to kick around anymore, so consumers who buy their entertainment in packaged form have no choice other than to buy it on DVD.

That's not entirely accurate, and this brings me to the third reason home entertainment appears to have a rosy future: next-gen discs. The Hollywood studios are really stepping up their efforts to promote the Blu-ray Disc and HD DVD formats, and tapping some increasingly high-profile titles as well.

Buena Vista generated some serious sales numbers last week with its two Blu-ray “Pirates of the Caribbean” releases, which collectively sold nearly 45,000 units their first week in stores. And Warner's two HD DVD-only “Matrix” collections, released on the same day as “Pirates,” turned a nice chunk of coin as well, generating nearly $1 million in consumer spending — again, in just a single week.